As communicated in our Year-End Tax Planning guide, the Superannuation Guarantee (SG) is increasing from 9.5 percent to 12 percent in 0.5 percentage point increments from 2021 through to 2025. The first increase, from 9.5 to 10 percent, is due to take effect on July 1 this year.
| Year | Superannuation percentage |
| Year starting 1 July 2020 | 9.5% |
| Year starting 1 July 2021 | 10% |
| Year starting 1 July 2022 | 10.5% |
| Year starting 1 July 2023 | 11% |
| Year starting 1 July 2024 | 11.5% |
| Year starting on or after 1 July 2025 | 12% |
This increase will require employers to contribute an additional 0.5% to meet their SG obligations under the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGAA). In a number of instances employers may have a difficult decision to make. Where the employees’ contract states the remuneration is inclusive of superannuation the employer may choose to absorb the superannuation guarantee increase into the remuneration package without any increase in the total package. This will, in turn, reduce the employees’ take home pay. Alternatively, the employer may choose to pay the 0.5% superannuation guarantee in addition to the inclusive remuneration package, thus maintaining the employees take home pay.
For those employees paid on a “base plus” remuneration model, where superannuation is paid on top of a specified salary, the employer will need to pay the additional 0.5% superannuation on top of the employees’ specified remuneration package thereby not reducing the employees take home pay.
A survey undertaken by consultancy firm Mercer, suggests that 63 per cent of organisations paying staff with a “total package” approach will offset at least some of the cost of higher superannuation contributions by reducing employees’ take home pay.
For those paid on a “base plus” remuneration model, where superannuation is paid on top of a specified salary, the news is brighter. Of those firms surveyed 62 per cent said they would meet the full cost of higher superannuation contributions, in turn maintaining employees’ take-home pay.
If you haven’t already, you should start planning how this SG increase will be implemented and communicated, which will depend on each employees remuneration structure as detailed above.
As usual, should you have any questions or need any help with Superannuation obligations, please reach out to our team and we will endeavour to do our best to assist.
Stay Safe.
The Team at Rose Partners
